Asian shares in cautious start before Fed review

MSCI's broadest index of Asia-Pacific shares outside Japan inched down 0.1 per cent in early trading

TOKYO - Asian share markets opened on a tentative footing on Wednesday, with investors cautious amid the backdrop of East-West geopolitical tensions involving Ukraine and ahead of a closely-watched Federal Reserve policy review later in the session.

MSCI's broadest index of Asia-Pacific shares outside Japan inched down 0.1 per cent in early trading, while Australian shares also shed about 0.1 per cent.

Global markets have been buffeted in recent weeks by the crisis in Ukraine, slowing growth in China and a mixed economic picture in the United States sparking renewed speculation about the pace of the Fed's stimulus tapering.

The Fed is widely expected to continue to reduce the size of its monthly bond purchase programme by US$10 billion (S$12.6 billion) each meeting, but also alter its forward guidance when it delivers its policy statement on Wednesday. The policy review will be the first presided over by Fed Chair Janet Yellen. "What will also get a lot of attention is the winter that the United States has just suffered. Some commentators are looking for evidence of recognition from the FOMC that the winter has altered their guidance on the economic recovery -as tapering has been explicitly based on data," Evan Lucas, market strategist at IG in Melbourne, said in a note to clients. "However, we believe the winter is unlikely to sway its thinking and the current timeline for the unwind of monetary stimulus will remain," he said.

On Tuesday, US stocks climbed for a second straight session, with the S&P 500 within striking distance of its record after comments from Russian President Vladimir Putin that he did not plan to seize other regions of Ukraine were taken as a signal that the crisis may not deepen.

The euro stood little changed, with a recent rise in US Treasury yields slightly denting its appeal relative to the dollar and preventing the common currency from extending its 2-1/2-year high of US$1.3967 hit last week.

The euro was last steady US$1.39305, and against the Japanese yen it was fetching 141.30 yen (S$1.76), largely steady from late New York levels.

The dollar was down about 0.1 per cent on the day at 101.40 yen, The Australian dollar brushed a three-month high of US$0.9138, riding on upward momentum gained on Tuesday when the Reserve Bank of Australia's policy meeting minutes showed that the central bank had strengthened its view of a stable interest rate outlook.

The 10-year US Treasury note yielded 2.672 per cent, having pulled away from a recent trough of 2.610 per cent hit last Friday.

An rebound in risk appetite continued to dampen demand for gold. Spot gold was at US$1355.51 an ounce, having slipped from a six-month high of US$1,391.76 hit on Monday.